After several months of calming trade tensions between the U.S. and the rest of the world, President Donald Trump is on a tariff tirade again. This time, the White House is targeting the European Union, despite Washington officially suspending metal tariffs on the 28-nation bloc in July 2018 in exchange for greater agriculture imports. The “good faith and understanding” has eroded, leaving the American leadership in a position to put levies back on the table.
President Trump recently announced on Twitter:
“The World Trade Organization finds that the European Union subsidies to Airbus have adversely impacted the United States, which will now put Tariffs on $11 Billion of EU products! The EU has taken advantage of the U.S. on trade for many years. It will soon stop!”
Just as the U.S.-China trade war was winding down, it seems another spat is around the corner.
A Tariffying Fight
One of the most subsidized industries on the planet is aerospace. All over the world, airplane manufacturers receive government assistance to develop planes and stay competitive against other firms that are supported by taxpayers in other jurisdictions. This is prevalent in the U.S., Canada, and Europe.
For instance, Airbus, a European aeronautical behemoth, was given a loan of nearly $700 million from Germany to produce the A380 superjumbo airplane. It turned out to be a waste for Germans because the company eventually scrapped the plane. Berlin is trying to get its money back. As another example, the fledgling Bombardier, which constantly misses deadlines and is facing corruption allegations, has received $1.1 billion from Industry Canada since 1970.
It is this public policy that President Trump and his team of trade representatives believe is unfair to global competition. As a result, the White House assembled a list of potential E.U. goods that could be slapped with taxes, ranging from commercial aircraft to wine to dairy – a final list is scheduled for release this summer after the World Trade Organization (WTO) assesses its complaints.
The administration says these tariffs will offset the subsidies for Airbus.
In 2018, the WTO confirmed it would evaluate a U.S. request to implement billions in sanctions on European goods in response to a ruling that the E.U. issued illegal subsidies to the aerospace titan.
U.S. Trade Representative Robert Lighthizer said in a statement that “the time has come for action” 14 years after the initial complaint had been submitted:
“Our ultimate goal is to reach an agreement with the EU to end all WTO-inconsistent subsidies to large civil aircraft. When the EU ends these harmful subsidies, the additional U.S. duties imposed in response can be lifted.”
In June 2018, the president imposed a 25% tax on steel imports and a 10% duty on aluminum products from the E.U. Brussels retaliated with $3.4 billion worth of tariffs on U.S. steel, agriculture, and alcohol. However, following a “friendly” meeting between President Trump and European Commission President Jean-Claude Juncker, both sides agreed to find ways to minimize non-tariff barriers.
Boeing, Boeing, Gone
The U.S. might have a legitimate case about foreign governments subsidizing private enterprise if it didn’t partake in this practice, too. Boeing has been receiving state assistance even before Airbus started begging for taxpayer-funded handouts.
Between 2000 and 2014, Boeing has been given $457 million in federal grants, as well as $64 billion in federal loans and loan guarantees. The company has also gotten about $13 billion from state and local governments. This does not include the massive military contracts from the Department of Defense.
The Export-Import (Ex-Im) bank is another major backer of Boeing. The export credit agency extended 34% of its aid to the aerospace brand, making it the biggest beneficiary of Ex-Im support. No wonder why the government body is considered “Boeing’s bank.”
Simply put, Boeing is the king of corporate welfare and crony capitalism.
It is no surprise that industry will agree with U.S. officials about unfair competition. Doing so will lead to either enhanced support from the government or politicians and civil servants intervening to prevent further market encroachment from foreign rivals. Of course, it is difficult to fault Boeing and others for mooching off taxpayers, just as it is hard to blame other Americans for taking advantage of generous programs. You would be a sucker not to. It’s why the last couple of generations belong to the something for nothing society – an exclusive, pockets-empty-only club for moochers.